Asavela Gwele
Gen Zs (those born between 1997 and 2012) will be the generation that faces the biggest hurdle to save adequately for retirement; following a legacy of previous generations that have simply not saved enough into their golden years nor have left enough for their successors.
However, Gen Z is also faced with more financial information, investment vehicles and opportunities than previous generations.
The oldest Gen Zs now have a few years of work experience under their belts (provided they’ve been fortunate enough to find work) while the youngest will join the workforce within the next decade.
Even for those already in the workforce, retirement probably feels a long way away. For some, the combination of rising interest rates and inflation means that it may feel completely unattainable. That’s not an unreasonable feeling to have either.
According to the most recent 10X Retirement Reality Report, just six percent of South Africans will be able to afford to retire comfortably. The report also found that most South Africans haven’t formally planned for retirement. Those who have planned, meanwhile, are not confident that they are on track to be able to support themselves for the long-term considering inflationary pressures and the economic climate.
In other words, Gen Zs don’t have the best examples to learn from when it comes to their own retirement journeys. That does not, however, mean that they should lose hope of ever being able to retire comfortably.
As Asavela Gwele, Investment Consultant at 10X Investments points out, Gen Z has something incredibly powerful on their side that older generations don’t; and that’s time.
“With any long-term investment like saving for retirement, time matters a great deal,” she says. “That’s because time allows compound interest to work its magic. So, even if you’re only able to put away a relatively small amount every month, you’re going to be better off in the long run than if you try and put more money in later on.”
Doing so also doesn’t necessarily mean that Gen Zs have to give up on the experiences they so value either. Internationally, a trend has emerged called “soft saving”, whereby spending on experiences are prioritised over saving for the long term.
According to Gwele, however, it doesn’t have to be a matter of either-or. In fact, he says, Gen Zs can use their savings for experiences to shift how they think about retirement.
“If you can match what you save up for your annual holiday and add that to your retirement savings,” she says, “suddenly committing to those savings feels less like it’s about making it through the day-to-day of old age and more about still being able to have incredible experiences long after you stop working.”
No matter how much anyone in the Gen Z cohort can put away, Gwele adds, there are some fundamentals that everyone should follow when it comes to choosing retirement and investment products.
“Ideally,” he says, “you should look for a product that has consistently beaten long-term industry returns, is properly diversified, has demonstrated resilience, has transparent, easy-to-understand fees, and doesn’t include performance fees.”
Ultimately, Gwele believes that, despite South Africa’s economic travails, Gen Zs have a unique opportunity to break South Africa’s cycle of poor retirement savings, particularly if they’re fortunate enough to land themselves a job straight after studying.
“While South Africa’s economic issues are very real,” she says, “Gen Zs are entering the workforce at a time when there’s never been a greater variety of financial products and relevant financial information available. If they can leverage the best of those products and take in the information available then they can give themselves a really good chance at a comfortable retirement.”